With my first pay cheque, I experienced my first sense of
financial liberation. With all this money, now I can finally do
what I want. Or so I thought.
Between socialising with your friends, attending some workout classes, and your weekday lunch of around S$4-5, there seems to be scarcely enough left over to save. Of course, managing expenses may help but what is a more sustainable solution is to expand the income streams.
That’s when I started hunting for a “second income”. Where to start though? At that point in time, I attended talks held by the Singapore Exchange (SGX) to explore my options. One point that was raised, and that left a strong impression on me, was the long “runway” for investment.
Compounding over time
I am only 25 years old this year. Since I’ve only worked for one
to two years, I don’t have too much saved up. But what youth
offers me is a long runway to invest. This means that I can enjoy
the compounding effect on my investment over 30, 40 or even 50
If the stock market rises, an initial investment will also rise over time. In the past 10 years, according to the Financial Times, the S&P 500 index in US has yielded a compounded annual return of approximately 10.5% since August 2008.
Moreover if you add in the dividends you receive and then also reinvest those then the returns would have grown significantly more. In essence, this is compounding and the investment amount has the potential to keep compounding the longer the investment time frame.
Good things take time
The famed Chinese billionaire Jack Ma once said that “The very
important thing you should have is patience”. History has shown us
that despite major periodic crises, the major stock markets have
been on an overall upward trend through the decades.
This is an important lesson for any investor whether a seasoned pro or a novice: you need to be able to wait out any potential crisis in order to reach better times.
Of course, this necessitates having a safety net so that in times of need, you can have something to draw on. Being in my early 20s, there aren’t too many commitments but neither is there abundant capital for me to invest. But the long runway for investing is still there and it is one asset that we should all remind ourselves of.
by Hui Yi Tee, English Editor @ FIGS
24 Aug 2018
(Please note that all views expressed in this article are solely my own and do not represent the opinions of FIGS or its related companies)
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